Unit economics
Weigh new and expansion MRR against churn and contraction.
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What is a good SaaS quick ratio?
A SaaS quick ratio of 4 or higher is the common benchmark: you add $4 of new and expansion MRR for every $1 lost to churn and contraction. The threshold came from investor Mamoon Hamid of Social+Capital. Between 1 and 4 you are growing but leaking; below 1 MRR is shrinking. Early-stage companies are judged against 4 most strictly.
3.13× is healthy, but churn and contraction are eating a meaningful share of new MRR. Tightening retention would compound your growth quickly.
Quick ratio ≥ 4 is the durable-growth benchmark. Below 1, you’re shrinking despite new sales, the classic sign to stop pouring in leads and fix churn.
About this calculator
Net new MRR can look healthy while masking a business that's adding and losing revenue at nearly the same pace, a leaky bucket that needs constant refilling. The SaaS quick ratio strips that ambiguity out by weighing everything you gained (new and expansion MRR) against everything you lost (contraction and churned MRR) in a single ratio, giving a faster read on whether growth is durable or fragile.
How to use it
- Enter new MRR and expansion MRR for the period, the two ways you gained recurring revenue.
- Enter contraction MRR and churned MRR, the two ways you lost it.
- Read the quick ratio, gained MRR divided by lost MRR, alongside net new MRR and a durability rating.
Methodology
Gained MRR is new MRR plus expansion MRR; lost MRR is contraction MRR plus churned MRR. The quick ratio is gained divided by lost, if lost MRR is zero the ratio is treated as infinite, since there's no loss to offset the gain.
Net new MRR is simply gained minus lost, the same net figure used in an MRR bridge, but the quick ratio expresses it as a multiple rather than a dollar amount, which makes it comparable across companies of very different sizes.
The tool grades the ratio into four bands: 4x or above is excellent, 2x to under 4x is healthy, 1x to under 2x is fragile (still growing but with a meaningful share of new MRR immediately offset by losses), and below 1x means the business is shrinking, churn and contraction outpace everything you're adding, regardless of how much new business you close.
A quick ratio can look strong purely because "lost MRR" is a small denominator even if churn is a real problem, always check net new MRR and the absolute churn dollar figure alongside the ratio, not the ratio in isolation.
The SaaS quick ratio formula
Gained MRR = New MRR + Expansion MRR Lost MRR = Contraction MRR + Churned MRR Quick ratio = Gained MRR ÷ Lost MRR Net new MRR = Gained MRR − Lost MRR
- New MRR
- MRR from customers who started paying during the period.
- Expansion MRR
- Added MRR from existing customers: upgrades, extra seats, add-ons.
- Contraction MRR
- MRR lost from customers who stayed but downgraded.
- Churned MRR
- MRR lost from customers who cancelled entirely.
If lost MRR is zero, the tool shows the ratio as infinite. The tool has no field for reactivated (win-back) MRR; ChartMogul's formula leaves it out too, so either exclude it or add it to new MRR and say so. Use the same period, usually one month, for all four inputs. For the full five-movement reconciliation, use the MRR bridge planner.
Worked example: one month of MRR movements
A SaaS company records $90,000 of new MRR and $35,000 of expansion in a month, while losing $12,000 to downgrades and $28,000 to cancellations.
- Gained MRR = $90,000 + $35,000 = $125,000.
- Lost MRR = $12,000 + $28,000 = $40,000.
- Quick ratio = $125,000 ÷ $40,000 = 3.1, rated "Healthy" (2 to under 4).
- Net new MRR = $125,000 − $40,000 = $85,000.
- To reach 4.0 by growth alone, gained MRR must rise to $160,000 (4 × $40,000), $35,000 more a month.
- To reach 4.0 by retention alone, lost MRR must fall to $31,250 ($125,000 ÷ 4), only $8,750 less a month.
- Rupee version: ₹6 lakh new + ₹2 lakh expansion against ₹1 lakh contraction + ₹3 lakh churn gives ₹8 lakh ÷ ₹4 lakh = 2.0.
At 3.1 the company grows well, but cutting losses by $8,750 a month moves the ratio as much as adding $35,000 of new business. That asymmetry is why the quick ratio pushes attention to retention: every dollar removed from the denominator counts about four times as much at this level. The churn cohort visualiser shows where those losses come from.
Monthly revenue churn by price point, and the gained MRR a 4x quick ratio needs
| ARPU cohort | Median monthly revenue churn | Gained MRR needed for 4x (% of MRR per month) |
|---|---|---|
| Under $10 | 7.8% | 31.2% |
| $10–$25 | 7.1% | 28.4% |
| $25–$50 | 8.5% | 34.0% |
| $50–$100 | 8.8% | 35.2% |
| $100–$250 | 7.4% | 29.6% |
| $250 and up | 5.6% | 22.4% |
What quick ratio should you aim for?
The 4x line comes from venture investor Mamoon Hamid of Social+Capital, who, according to Chargebee, proposed that a quick ratio of 4 and above marked a company worth investing in. Use it with stage in mind:
- Early stage: aim for 4 or more. The base is small, so losses are small in dollars and a high ratio is easier to reach.
- Scaling companies: the ratio usually falls as the base grows, because the same churn rate removes more dollars each month. Chargebee notes a lower ratio at scale does not necessarily signal danger.
- Below 1 at any stage: MRR is shrinking. Fix retention before adding acquisition spend.
The table above shows why 4x is hard for low-priced self-serve products: with 7% to 9% monthly revenue churn, gained MRR has to equal roughly 28% to 35% of MRR every month. Products with higher ARPU and lower churn reach 4x with far less new business. For the retention side on its own, see the net revenue retention forecaster and the guide to reducing B2B SaaS churn.
Quick ratio in India vs the US
For rupee-billed products, failed UPI AutoPay mandates, card renewals and lapsed annual invoices can appear as churn when the customer did not mean to leave. Track involuntary churn separately before treating a low ratio as a product problem; recovering failed payments reduces the denominator directly. Keep GST out of every MRR figure. For Indian SaaS companies selling to US buyers, compute the ratio in one currency so exchange moves do not count as expansion or contraction.
US SaaS companies selling on annual contracts see churn arrive in renewal months, so a monthly quick ratio can swing between very high and very low. A trailing three-month or quarterly ratio is steadier. The 4x benchmark itself came from US venture investing, so US investors are likely to apply it directly to early-stage companies.
Common quick ratio mistakes
- Forgetting contraction. Downgrades are losses even when the customer stays.
- Counting reactivated customers as new MRR without saying so, which flatters the ratio.
- Mixing a month of new MRR with a quarter of churn, or the reverse.
- Reading a very high ratio from a small base as proof of retention. A young company with little MRR has little to lose.
- Including one-time fees or GST in new MRR.
- Treating the ratio alone as health. Always read net new MRR and churned dollars next to it.
Sources
- What is SaaS Quick Ratio, Chargebee. Accessed 2026-10-17.
- SaaS Quick Ratio: A Faster Growth-Efficiency Signal, ChartMogul. Accessed 2026-10-17.
- SaaS Financial Benchmarks: Churn, Growth and Retention Rates by ARPU, Baremetrics. Accessed 2026-10-17.
FAQ
This tool treats 4x and above as excellent, and most operators consider 4x the benchmark for durable, retention-driven growth. A ratio between 2x and 4x is workable, but below 2x means churn and contraction are consuming a large share of what you're adding.
NRR looks only at existing customers, expansion and churn among the base you already have, and excludes new business entirely. The quick ratio includes new MRR in the numerator, so it answers a different question: is total growth (new plus expansion) outpacing total loss (contraction plus churn), not just how the existing base alone is trending.
Yes, if new MRR dominates the numerator while churn is quietly high in dollar terms, the ratio can still look strong because new sales are masking the leak. Always look at the underlying churned MRR dollar figure and NRR alongside the quick ratio, not the ratio alone.
Contraction is revenue lost from customers who stayed but downgraded, fewer seats, a lower tier, a removed add-on. Churned MRR is revenue lost from customers who canceled entirely. Both count as losses in this calculator's denominator, since both represent MRR you no longer collect.
Add new MRR and expansion MRR, then divide by the sum of churned MRR and contraction MRR for the same period. $125,000 gained against $40,000 lost gives a quick ratio of 3.1.
Mamoon Hamid, then a partner at the venture firm Social+Capital, introduced it and proposed 4 as the investable threshold. The name borrows from the accounting quick ratio, though the SaaS version measures growth efficiency rather than liquidity.
Churn scales with the size of the base while new sales do not automatically keep up. A company with 2% monthly churn loses $2,000 a month at $100,000 MRR but $20,000 at $1M MRR, so it needs ten times the new business to hold the same ratio.
Not necessarily. At 2 you add twice what you lose, so MRR is still growing, but half of each month's new and expansion MRR goes to replacing losses. For an early-stage company it suggests retention needs work; for a large, mature base it can be acceptable.
Monthly for self-serve products with monthly billing, quarterly or trailing three months for annual contracts. ChartMogul notes that small companies should read it as a rough directional signal because single events move it a lot.
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